The more conversations I have with founders the more I'm convinced that $1200 and market buys on $HYG won't do anything for the average US citizen

some thoughts...

PPP loans were intended to help businesses make payroll and stay open

But they make less sense than furloughing their staff. This is leading founders to realize who is effective and who isn't on their payroll

A lot of those furloughed will find themselves unemployed

Assume we have a V bottom recovery in the economy (not $SPX), where we are all back to normal

When founders are faced with the reality that they weren't prepared for hard economic times, they will only be bringing back the franchise players and letting the rest go

The delta between an unemployment rate of 3.6% in January to ~14.7% in April (or roughly 300k to 17m people unemployed)

How many will be left unemployed?

When these founders realize the super sexy class A real estate that they leased out in highly dense locations to entice staff during peak employment are now a liability, not a perk, and these buildings are completely empty

They will have a lot more capital to work with

Think about this..If you had 100 ppl on staff + all the unnecessary things to entice ppl to come work for you pre CoVid19, when there were it was nearly impossible to hire, it was too competitive

And you furloughed 50 ppl, cut rent, coffee, catered meals, in office child care...

...and all the other excessive perks

Suddenly you have a lot of cash to work with to build the dream team, it's a reset

These founders are years into their projects, with lot's of insights that they didn't have when they raised their last round of funding

This reset is giving them the ability to rewind a year or two back, with better knowledge and experience, getting rid of a whole lot of people who might've slipped through the cracks before and re-do their business

The founders are doing the right thing, it sucks and it hurts

They aren't fund raising perpetually anymore, checkbooks aren't open anyway

This is a reality, the hangover after the party

There will be a lot of people who think they have a job to go back to here shortly in the unemployment line

This is about improper incentives

Trillions of dollars is being spent to save the economy, but it isn't enough

$1200 per person isn't enough

I know it sounds socialist and unfair to give people money for having a pulse but it is far less fair to place market orders on $HYG for trillions and trillions of dollars

Oh just a quick side note, Consumer spending accounts for 70% of US GDP

If $6.2 Trillion dollars gets thrown at the market and we still have more people being unemployed then what?

You know that if the market starts tanking again, they will start bidding up all assets, throw $10 Trillion at it? Then What?

Imagine a $10 Trillion dollar stimulus package being thrown at the market, you are unemployed, and all you get to show for it is $1200

$1200*331m people =$397B

Even if consumers receive & spent all of it, $397B is barely a blip of GDP

$1200 is about 7 days of average US consumer spending
(housing, transportation, food, healthcare, PWG)

Imagine a $10 Trillion dollar stimulus package being thrown at the market, you are unemployed, and you get a $1200 check PER MONTH

That would be $397B per month

(I'm not dropping it to $500 for dependents)

A household of 3 like mine would receive $3600 per month

That would incentivize consumer spending

So if, and why would we believe it isn't, $10T is on the table, or inevitable, that's about 10 months of $1200 checks to every person

Instead of a step up to $10T to bail companies out who aren't going to hire people back anyway

“Never, ever, think about something else when you should be thinking about the power of incentives.” Charlie Munger